Protecting Your Business
How would the business manage if a key member of your team – or you – were unable to work or worse still passed away? What plans do you have in place to keep the ‘show on the road’?
- Could remaining business partners manage the work load?
- Would they be able to buy out the shares of the remaining spouse?
- Where would they get the money from and how easily would they get the money?
- How would your suppliers react?
- How would the bank react?
- How would your customers react?
Many businesses put insurance in place to protect the value of their stock, the buildings and the motor vehicles. But what about the people that work in the business – those that have key relationships with suppliers, customers and years of knowledge. Allsure Financial Solutions can help you to develop a plan for you to protect your business.
If a business owner suffers a severe disability or dies prematurely, the proceeds from a Business Insurance claim can provide you with the cash to repay all or a significant part of the business debt.
For example, as a business you have borrowed $1,000,000 to expand the distribution of your services, then one of the partners dies prematurely or becomes disabled, the remaining partners will be left with all the debt. Appropriate levels of Business Insurance with the correct ownership structure protects the business, the business owners and their families.
If a business partner dies or suffers serious disablement, Business Insurance can provide the funds for the remaining business partners to buy the shares from their partner or their estate.
How will this work?
It is essential that you have a buy/sell agreement in place that sets the rules as to what will happen if one of the partners is no longer actively contributing to the business. We would recommend that you seek legal advice when setting up a buy/sell agreement.
Who owns the policies?
Generally, the business partners will own the policy on their business partners life and vice versa. It may however be prudent to have an independent trustee own the policies to ensure that the buy/sell agreement is honored at the time a Business Insurance claim is paid.
Key Person Insurance
When considering Business Insurance consider the following:
- Who are the key people in your business?
- How do you value the key person’s contribution to the business?
- If the key person could no longer work in the business, what would the impact be on your business cash flow?
Allsure Financial Solutions can assist you in determining what revenue a key person brings in to the business and what other costs would be associated with the loss of that key person – it may be recruitment costs – it may be the time it takes to get a new person up and running. A Business Insurance injection of cash at this time can cover these costs and reassure customers and creditors.